← Merryn Talks Money
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- [00:00]
IBM Representative
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- [00:29]
Venture Global / The Hartford Representative
IBM never bet against American Grit or American Energy through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering and claims experience. Learn more@thehartford.com riskmitigation policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut
- [01:43]
Podcast or Advertisement Narrator
Bloomberg Audio Studios Podcasts Radio News Foreign.
- [01:58]
John Stepek
Welcome to the Marin Talks Money Market Wrap where we talk about the biggest moves in markets this week and what's driving them. I'm John Stepik, senior reporter and author of the award winning Money Distilled newsletter. And joining me while Marin is out is Morwenna Coiniam. Marwena is co editor of the Bloomberg Markets Today blog in London and writes about UK assets, economics and markets more generally. Morwenna, thank you so much for joining us again.
- [02:23]
Morwenna Coniam
Thank you for having me.
- [02:24]
John Stepek
Morena thanks for joining me. Now we're recording this in the morning of July 8, Wednesday and so by the time you listen to this, things may have changed, but hopefully the themes that we discuss are fairly long running. So today we're going to talk about the on again, off again ceasefire on Orion, whether the EA bubble has bust. Thanks to Meta's CEO and what all this means for UK markets and your money. The Iran ceasefire has been on again and then off again and at the moment it's off again. I'm sure that we may see fluctuations in that status over the coming days. But for now, that certainly can only put the wind up the market a bit.
- [03:06]
Morwenna Coniam
It has. We've seen quite a big escalation in bond yields thanks to an oil price spike following comments from US President Donald Trump. As far as he's concerned, the ceasefire is over. Of course, there may well be a lot of further developments on that topic, but we are seeing some of the bond rally really pulling back. Bonds are falling in Europe and particularly the UK as those inflation concerns start to creep back into people's minds. And we're seeing that in central bank bets as well. Those hiking bets are being added to today. Still only pricing in, at the moment, one hike from the bank of England this year, but there's about a 1 in 3 chance now that there might be a second one. And it's up quite considerably from where we were earlier in the week. So at the moment that's the trajectory. But I think what it really shows is that there is still a lot of volatility and a lot of uncertainty. And I'd say for the last month or so, the market has started to be pricing in a degree of stability, thinking this ceasefire is going to hold and that the second half of the year would be one of lower oil prices and improvement. We're still not back where we were, but I think things are a lot less settled than perhaps had started to be deemed the case.
- [04:32]
John Stepek
It is interesting because I think the thing that's always struck me, or struck me since this began, is that on the one hand, it's not a good idea to second guess the market, but at the same time, the level of complacency and sort of faith that this would all kind of come out in the wash, I mean, the fact that oil prices were down to where they were at the start in this conflict back at the end of February, I mean, I'm sure that this is just another phase in the ongoing kind of saga and it'll be all sunshine and roses again at some point. But I guess it's this point about how markets really haven't considered the potential downside here, or they're maybe getting a bit too comfortable with the idea that it was all going to be okay. And hence the kind of slightly kind of the big reaction to today not being. Oh, it's actually not all over.
- [05:34]
Morwenna Coniam
Yeah, absolutely. I mean, I think there's perhaps an element of complacency, as you say. I think there was also an element of fatigue. We've had a few weeks of things seeming steadier, but that followed months of quite extreme volatility with quite big swings on every comment. And actually those moves got smaller. And whilst we have seen a sizable reaction today, it's nothing compared to at the beginning of the war. So I think markets, they've permanently priced in a certain degree of volatility now. But very interesting to see, I think where we go from here now that uncertainty question is back in there and in other areas of markets, of course. So we are seeing bigger fundamental shifts which are also impacting some of the moves in equities that we're seeing beyond the sort of on again, off again Iran war situation.
- [06:33]
John Stepek
Oh yeah, because this is also the AI bubble story seems to be, I don't know, obviously can't time these things. It's very hard to tell. There does seem to have been a bit of a sentiment tipping point. I mean, I don't know what you think, but I think Meta said like the Facebook boss last week, coming out and saying effectively that or not even to be fair, they hinted at it, they said, okay, so we're building all this capacity in order to create an AI, but actually we might end up just renting out to other people because, you know, that will make us some money in the meantime. And you get the sense that markets took that to mean, wait a minute. Because the thing, the bogeyman everyone's waiting for is we've built too much of this stuff and now we need to monetize it. And if Meta are turning around already and saying, okay, we're building all this stuff but effectively we're not going to need it, so we'll rent it to someone else, I think it sort of appears to have made people in the market think twice about their exposure to semiconductors and chip manufacturers. I mean, Jay, that's kind of sort of a fair summary.
- [07:46]
Morwenna Coniam
Yeah, I think there's definitely been a bit of a reassessment and people looking along with supply chain. So where we'd seen a lot of the focus, those high growth sort of chip making stocks, the data centers that has been on such a long rally, I think the question was always how far can this go? And maybe we're starting to get a bit of the answer. We still have days of rallies, but we are increasingly seeing the sort of reversal. We're seeing a pivot in trading patterns and people looking for value elsewhere. So it's still in the tech space, but. But who stands to benefit from other parts of the AI trade? Some of the sort of more traditional tech companies even, you know, seeing Alibaba soaring in China rather than Samsung. And we are seeing a shift, I think, and whether that's going to continue in a linear fashion or we're going to see a bit of back and forth, but I do think there's definitely been rotation starting and some sentiment change changing and that is obviously weighing on global equities because it's been where so much of the power has been. There are pockets which can be resilient to that and that the UK is one of them. We don't have much exposure. Tech, we've been missing out quite a lot. But on days where you see a sell off, in fact the last two days, one of the worst performing sectors in Europe has been technology. And, and the UK, particularly the FTSE 100 is only very slightly exposed to that with some sort of funds, meaning that even if it falls with the global broader sentiment, it's actually been outperforming peers. It's also of course supported by some fairly heavyweight oil stocks like BP and Shell. So the Iran conflict escalation or potential escalation certainly plays into its hands as well there. But it's certainly a time I'd say people would be wanting to look at diversifying. And diversifying is paying off and not having all of your eggs in one very specific type of tech basket.
- [09:58]
John Stepek
Well, I suppose, yeah, arguably, I guess in this context the UK is a defensive market. Whereas if you're looking for something to offset your South Korean Cosby exposure, which has been up and down like a yo yo, because it's basically two stocks, I guess kind of the UK looks more appealing to people.
- [10:24]
Podcast or Advertisement Narrator
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- [11:24]
IBM Representative
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- [11:52]
Venture Global / The Hartford Representative
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- [12:49]
John Stepek
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory services by Public Advisors LLC. SEC registered advisor complete disclosures available@public.com disclosures. The other big thing this week was the bid for EasyJet, which is obviously a big name consumer brand, you know, even if it's not the kind of largest company in the the ftse. So there's a private equity company that's come along and decided that, oh look, we're gonna bid for this and it seems to be going through. I guess the question is, is there going to be a point at which this sell off of the UK as a whole kind of comes to some sort of end, or are we going to see the IPO pipeline pick up? Because someone actually put it very well in the FT. It's a ratio of 27 to 1 in terms of the value of stuff vanishing from the market and the value of things coming in to replace it? Are there any hints I was reading that perhaps in the next six months, in the second half of the year, as long there's a bit less volatility, we may get a Few more additions in the IPO pipeline, but I guess if what we're seeing right now continues, that might get pushed back yet again.
- [14:13]
Morwenna Coniam
Yeah, I mean, there are a couple of companies that have been discussed as potential IPO candidates. I think Virgin Active was one of them. But overall, we've seen two trends. One is UK companies being acquired because to our point about the FTSE generally underperforming in a way, they are so much cheaper, so they are seen as good value and they're very attractive to overseas buyers. Unfortunately, that also means that when companies are looking at which market they're going to list in, they potentially see more potential gains from listing in the us. And I think, you know, when you look at actual performance, that can vary because you can certainly be a big fish in a small pond or you can potentially be overlooked. But there's a lot more investor activity. One interesting thing I think it was last week was Robin Hood CEO was talking about trying to get people in the UK so retail investment more and, you know, that could help potentially if there's more of an investment culture in the UK at the moment. UK companies aren't even owned predominantly, you know, by UK holders. So I don't think we're going to see a massive shift in that. But of course, if we see a fundamental change in valuation ratios, then we might see less M and A and more listings here.
- [15:39]
John Stepek
Yeah, I mean, I suppose that's the thing because, I mean, the Robin Hood thing is interesting because the FCA has relaxed the rules about financial advice. So in order to make it more feasible to give beginner investors the kind of very basic stuff that people in this office, personal financial analysts, write about all the time. But the companies themselves are not allowed to say that to people because it's sort of like it has been deemed as being too much like personal advice by the regulatory regime. But that is getting relaxed. So it'll be interesting to see if that can put a dent in the kind of UK investors kind of, you know, reluctance to save. Although I still think tax stuff would probably help.
- [16:23]
Morwenna Coniam
I was about. I was about to say it is a lot easier. Well, certainly taxation wise to buy foreign stocks to the UK stock market's detriments. You know, things like capital gains tax do re. That's been something that's been discussed and I think that will probably continue to be in the conversation. If the government, whoever is leading it, want to continue this push to make us a nation of investors, not just savers, that there's going to have to be some more sort of attractive incentives. And certainly people don't want to feel financially penalized for investing in UK companies instead of foreign ones.
- [17:02]
John Stepek
Yeah, can they get rid of stamp duty? But there is one upside we were discussing just before you came on to the constant kind of flow of M and E activity from outside into the uk, and that's that it might be responsible for the pound being surprisingly strong this year.
- [17:22]
Morwenna Coniam
It has been suggested that it's at least helping the pound is actually, I was just checking that the third best performing major currency so far this year, which is quite surprising when you consider that the dollar has benefited from the US Iran war, which would normally weigh heavily on the pound. It's weighed on all peers. But also we've had this sort of domestic political turmoil. I mean, our prime minister has just resigned. As yet the successor is not absolutely set in stone. And what they will do is quite largely unknown. Which when you look back over the last few years at how the pound has suffered as a result of economic uncertainty, concerns about what Rachel Reeves was going to do, even though she set out her plans, it's quite surprising that it's been unbelievably unruffled. One of the suggestions is actually that there's a lot of inflows as a result of foreign companies investing in UK assets, particularly company takeovers. They're both attractive for that. But it is supportive of the currency too.
- [18:36]
John Stepek
Okay, so if we get the stock market working again, we may have to contend with a weaker pound. Okay. I think that's a price that I'm willing to pay. Thanks very much Morwen. I really appreciate your time. As always.
- [18:46]
Morwenna Coniam
Thank you.
- [18:51]
John Stepek
Thanks for listening to this week's Marin Talks Money Markets wrap. If you like our show, rate, review and subscribe wherever you listen to podcasts and be sure to follow me and Maren on X Maren's Ernesw and I'm JohnStepek. The episode was produced by Summer Saadi and Moses Andam. Questions and comments on this show and all our shows are always welcome. Our show email is marinmoneyloombear.net and a special thanks to Morwenna Coniam.
- [19:20]
Podcast or Advertisement Narrator
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- [19:51]
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